Tax efficiency minimizes the cost of complying with the tax code by reducing its administrative burden and by minimizing any distortions in the economy caused by the tax. Reducing the administrative burden not only benefits the taxpayers but also the economy since tax collection is not an objective of tax policy, but simply a requirement. Although tax accountants and lawyers help people to comply with the tax code and reduce their taxes, their work has no true economic worth since the need for their help could be eliminated by simplifying the tax code and facilitating the filing of taxes, especially through electronic filing.

Besides trying to promote or limit certain activities, much of the complexity of the tax code results from Congress giving preferential treatment to particular groups, especially the wealthy and businesses. This preferential treatment is provided not only in the way that the tax is structured, but also in the form of tax loopholes, which allows taxpayers to take advantage of weaknesses in how the laws are actually worded to circumvent them, thus lowering their taxes in a way that Congress may or may not have intended.

Loopholes exist partly because of the complexity of the tax code, but, often, they are inserted intentionally so that the wealthy can take advantage of them. For instance, there are many obvious loopholes in the taxing of gratuitous transfers that the wealthy take advantage of year after year. Indeed, a large body of law has developed allowing the wealthy to transfer their wealth at a far lower tax rate than what is assessed on working income — usually, they can transfer their entire wealth tax-free.

Another objective of tax policy that is little heeded is that deadweight losses should be minimized. Although the cost of complying with the tax code does generate some deadweight losses, most deadweight losses are incurred by the tax itself, especially when it is assessed on working income.

Another often stated objective of tax policy is that taxes should not distort economic decisions, which occurs when people decide to do something differently because of the tax. For instance, high taxes on working income discourages work because it raises the price of labor for employers and decreases the disposable income for workers. That higher prices reduces demand and lower prices decreases supply are well-established economic principles, yet working income is taxed more than investment income or gratuitous transfers. There is no economic distortion from taxes on gratuitous transfers, because everyone dies eventually, regardless of any tax. Furthermore, there is no deadweight loss from gratuitous transfer taxes. As economists like to say, the supply of death is totally inelastic, while the demand for gratuitous transfers is totally elastic, because the beneficiaries receive their gift freely. Nonetheless, preferential treatment is given to gratuitous transfers because it benefits the wealthy.